Despite being blamed for the near collapse of the U.S. economy, banking interests remain a powerful force in shaping — and killing — legislation on Capitol Hill. But their muscle is being tested by a series of bills aimed at bringing the industry under Washington’s regulatory thumb.

“I don’t know how they could bring us to this situation in this economy and have lost so much credibility as an institution,— said Senate Majority Whip Dick Durbin (D-Ill.), who suffered defeat in a major battle with the banks last week. “To think they still have clout in this chamber to dictate what we’re going to do in terms of mortgages and foreclosures. It really troubles me.—

Durbin pointed to an April 23 Gallup Poll showing that only 18 percent of Americans expressed strong confidence in U.S. banks. But Durbin indicated that he believes the $37 million in campaign contributions and $56 million in lobbying expenses that commercial banks spent during the 2008 election cycle helped bolster the banks’ case with his colleagues.

Banking interests disagreed.

“Banks continue to play an important role in shaping legislation because we’re experts in the economy,— said Scott Talbott of the Financial Services Roundtable. “A lot of our message has been the balancing act between new regulations and the effect they have on the economy.—

Whether it was money, influence, expertise or some combination, banks scored a major win last week in defeating a key part of President Barack Obama’s housing foreclosure mitigation plan. That plan, known as “cram down— and spearheaded by Durbin, would have allowed bankruptcy judges to write down the terms of some primary home mortgages so that struggling owners could stay in their homes. Durbin estimated that 1.7 million homeowners would have been helped by his bill.

Already, banks have learned that not negotiating with the Majority Whip could have ramifications in the future. Durbin took to the Senate floor Wednesday to say he will no longer support bailouts like the $700 billion Wall Street rescue plan he voted for last fall.

“Their unwillingness to deal could cost them,— one financial services lobbyist said.

In particular, Democratic supporters of cram down singled out the Independent Community Bankers of America, who walked away from the negotiating table late in the process.

“That burned substantial bridges with the Democratic majority that is going to be rewriting the regulation of their industry,— one Senate Democratic aide added.

So far, the industry hasn’t backed down in pushing lawmakers to go easy on them. As the Senate looks to take up a bill this week to restrict credit card lending practices, the industry is heavily lobbying against two amendments regarding interchange fees and capping the interest rates on credit cards.

But some Members, including Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.), pointed to the slowly shrinking number of lawmakers willing to vote with the banks.

“Actually, we have been doing a lot better on some of these questions, regretfully for the reasons we’re all aware of, because we’re in such bad shape economically and people attribute a lot of those conclusions to the decisions made by these institutions,— said Dodd.

He pointed to last week’s surprisingly bipartisan House vote, 357-70, in favor of the House’s consumer protection bill for credit card holders. Dodd also noted that Durbin got nine more votes than he did last year on the cram-down measure, even though Thursday’s 45-51 vote still lacks even a simple majority in the chamber.

“You would never have seen the passage of a credit card bill like you did in the House today but for what’s going on,— Dodd said Thursday.

Meanwhile, the industry’s pariah status has many Members pointing out that they’re not necessarily listening to the giants of the industry but to small community banks that haven’t been hit as hard by the financial sector’s meltdown.

“They’re kind of the heartbeat and the blood that keeps the credit flowing in our communities and our economy,— Sen. John Thune (R-S.D.) said. “There are few bad actors out there, and I think that probably jades a little bit the image of the industry generally, but in most cases we know individually a lot of these bankers from our home states, at least. And we give them a lot of credibility because they generally are the people who are out there day in and day out keeping the credit flowing.—

Democrats who opposed cram down agreed.

“I’ve only talked to local bankers,— Sen. Ben Nelson (D-Neb.) said. “Main Street in Nebraska is different than Wall Street.—

Several financial services lobbyists said the community bankers are in a unique position because they aren’t considered the reason for the financial meltdown.

“I think we’re getting a tremendous hearing up on the Hill,— ICBA lobbyist Steve Verdier said. “It’s critical to recognize that we don’t automatically get what we want.—

He added: “We have our work cut out for us, but I’d rather be a community bank lobbyist than a big bank lobbyist.—

While supporters of the cram-down provision say the ICBA played a large role in killing the bill, the American Bankers Association’s lack of interest in negotiating did not escape Democrats’ notice either.

The Senate Democratic aide said Durbin and Dodd made clear from the start that negotiations on cram down were also being used as a way for Democratic leaders to find partners in the industry on banking regulation issues and other industry-specific legislation.

“We were trying to figure out who wants to work with us,— said the aide.

Anna Palmer contributed to this report.